Financial Management Tip Day 8: Do you know where to start in creating a budget?
I know many people see the word “budget” as a bad word but it really doesn’t have to be nor is it complicated or complex. I am a believer that the key is to start and you will work out the kinks in the plan as you go. The first month might be a little messy so it is important to keep notes, write down questions and any possible issues you encounter along the way.
Look at it carefully and frequently. Are you missing a category? Did you spend money this month that you couldn’t account for on your budget? Did you over spend in a category- why and is there a way to better control your spending or do you need to increase the budgeted amount for this category?
Budgeting is really about looking at the reality –money in and money out and making choices about your priorities. Be realistic.
Steps for beginning your budget:
- Get Organized– Gather your spending journal information, bank and credit card statements, gather current copies of your bills *for variable costs like your power bill you might want to look at 6 months of previous bills to discover your high and low points or an average, your pay stubs, and your debt statements.
- Be Exact– Do Not, I repeat Do Not use estimates! Write down the actual numbers down to the penny.
- Format– Start with a form you can find online or make your own. You can do it all on the computer or paper and pen. I like to print off a form that I fill out throughout the month by hand. I keep past month’s budgets to go back over and review. It let’s me compare from month to month.
- Don’t forget to Include Savings– Don’t forget these important categories. For example, if you start early, your retirement savings will cost you less per month. Do you want to stop renting and would rather own your own house, start saving for a house down-payment. Emergencies are bound to happen, unless you start an emergency fund, you will rely on credit during these difficult times.
- Remember Debt Repayment– Many of us have debt repayment in our life’s and this may range from student loans, mortgage, car payments, credit cards, loans from family or friends, line of credit, payday advance stores, past due amounts on bills, or items bought on buy now pay later plan. Start with a list of all your debts (who do you owe, what is your total amount owed, monthly minimum amounts, and interest rates)- we will look at debt repayment more closely this week.
- Try a 3 Column Approach– I like to use a three column approach to my budget sheet. 1. Budgeted Monthly Amount– What I have budgeted for spending in each category 2. Monthly Actual Amount– How much did we actually spend this month in each category 3. Difference– Did we over or under spend?
I am going to provide a blank budget page that you can use for your family (edit the cells to work for you and your family’s needs- add categories that are relevant for you). I like lots of categories- be specific. For example, you might need to add some categories for kids or planned spending such as vacations. Blank Budget Sheet
Here is a Sample Budget Sheet for you to check out. Is this person missing categories? Think about next steps? Is this person saving enough? What about increasing payments on their debts? Why is there budgeted amounts this month that were not spent- where does this money go etc?